A Dovish Yellen and a Dovish Congress Drive Stocks Higher

On Tuesday, the equity markets enjoyed one of their best days of the year, with big buying in the broad market that sent the S&P 500 back above its 50-day moving average. The benchmark measure of the domestic equity market really started to take off around 11 a.m. EST.

Why?

Well, that’s when Fed Chairman Janet Yellen began answering questions about the labor market during her Congressional testimony. Comments by Yellen indicating she was “surprised” by the weakness in the December employment report, and that despite seeing some improvement in the labor market, things weren’t yet back to “normal,” were widely read as “dovish.” That comment means the Fed likely will keep its foot on the accelerator until the labor market improves substantively.